Grim jobs data stokes fear around world

By Steven C. Johnson

NEW YORK (Reuters) - The U.S. economy hemorrhaged more than half a million jobs in November, data showed on Friday, sending stocks lower on both sides of the Atlantic and hammering currencies from Europe to Latin America.

Canada also absorbed more job losses last month than at any time since 1982, while Germany approved a stimulus package aimed at helping Europe's biggest economy weather what some fear may be its worst recession since World War II.

The biggest blow, though, came from the United States, where employers last month axed 533,000 jobs, the most for any month since 1974 and nearly 200,000 more than economists expected. The jobless rate hit 6.7 percent, the highest since 1993.

"These are horrendous numbers ... This is an economy that is in absolute free-fall right now. Confidence has collapsed," said Nigel Gault, chief U.S. economist at Global Insight.

Market reaction was swift: U.S. and European stocks tumbled, oil fell and the dollar neared a 13-1/2-year low against the yen. The euro also weakened, while emerging market currencies such as Brazil's real fell sharply.

So far in 2008, the U.S. benchmark S&P 500 index is down 43.5 percent, leaving it on track for its worst year since 1931, during the Great Depression.

With many developed countries either in recession or heading there, major central banks have cut interest rates sharply in the past week and attention is now focused on what happens if they drop to zero.

U.S. interest rate futures after the monthly jobs data were pricing in a half-percentage-point rate cut when the Federal Reserve meets later this month. That would take the benchmark rate to 0.5 percent, lower than it has ever been.

The U.S. economy fell into a recession a year ago and economists fear rising layoffs may keep it there well into 2009.

RGE Monitor economist Arpitha Bykere said he expects the U.S. economy to shrink 4.5 percent in the fourth quarter and by a similar amount over the first three months of next year.

"We don't see an economic recovery in 2009," he said.

The news also bode poorly for the holiday shopping season.

"There are less people working, and so less people buying," said Michael Kastner, head of taxable fixed income at Sterling Stamos Capital Management in New York. "We're in the holiday season and it means sales will be below expectations. The season will be awful."

Global sales at BMW, the world's top premium carmaker, plunged by a quarter in November, and Honda backed out of Formula One motor racing, vividly demonstrating the problems facing the auto industry.

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